IBond 1099-INT

[miernikcx]

I redeemed IBond I bought for my son (a 5 year old) in 2023. Now I received 1099-INT under my son's name and TIN. How should I report this income? Does this interest belongs to me or both me and my wife?

[rjs]

The interest belongs to your son. If that is his only income for the year, and it is $1,250 or less, he is not required to file a tax return and the interest does not get reported anywhere.

[miernikcx]

Thanks! Actually, we had the IBond for multiple years, ~$2000 interest in total. If the interest belongs to my son, how can I report it?

[Mike9241]

two options 

1) include the interest on your return using form 8814

can only be done if his only income is interest, dividends and/or capital gain distributions (from mutual funds or ETFs)

he's under 19 or under 24 if a full-time student at the end of 2023

he can't file a return if married

2) file his own return and if under 24 at year-end use form 8615 to compute his income tax. form 8615 requires information from the parents' return. 

if you're using online he needs his own account with a user ID and password. you can use your e-mail address 

he cannot use your account because only one return can exist at any one time. Doing a second person's return will permanently delete the first person's return that is done

[rjs · Accepted solution]

If the child's total "unearned" income is $2,500 or less (for 2023), "kiddie tax" does not apply, so Form 8615 is not used and information from the parents' tax return is not needed. Unearned income is investment income, including interest, dividends, capital gains, or any other income that is not from working.

So if the $2,000 of interest is the child's only income, you can just file a simple separate tax return for him. Reporting his interest income on your tax return (with Form 8814) could possibly result in paying more tax than if you file a separate tax return for him. It could increase the tax on your income. The only disadvantage of filing a separate return is that it's a little more paperwork.

If you are using the CD/Download Desktop TurboTax software, there is no extra cost for filing a separate tax return for the child. If you are using TurboTax Online you would not be able to use Free Edition for the child's return because he would need Schedule B, which is not included in Free Edition. But you should be able to use IRS Free File.